Bright Spot in a Bad Economy

IN these tough times, with gas prices setting records and airfares skyrocketing, many people are lucky to have jobs, let alone time to take a vacation. And yet there’s some good news for second-home owners hoping to rent out an investment property: vacationers are turning to these rentals more than ever.

“As the economy sours, demand for vacation home rentals increases, as rental homes are seen as inexpensive alternatives to luxury hotels,” said Douglas Pope, a founder of HotPads.com, a real estate search engine. “Also, people are now beginning to divert their vacations to more local spots where rental homes are an option.”

Not that you should run out and buy an investment property with the hope of getting rich on rentals or a short-term flip.

“If you’re going to flip it in a year or two, this is not the thing to do,” said Anne-marie Boyer, a broker with San Diego’s Finest Real Estate. “You need to plan to be in it for the long haul.”

But if you’re already in it, there is room for hope.

“Vacation rentals as a category are growing well in the U.S.,” said Justin Halloran, managing director of United States brands for HomeAway, a group of vacation-rental Web sites. “They are taking shares from hotels because they give more space, freedom and amenities than hotels” — like kitchens, private pools and more bedrooms for less money.

Mr. Halloran said that both supply and demand are going up, particularly in what are called “drive markets,” regions that vacationers can reach by car, like the Hamptons in New York or Ocean City, Md.

In the second quarter of 2008, inquiries about vacation rentals in Las Vegas on HomeAway.com increased 67 percent from the same period in 2007, and the supply of properties was up 31 percent. Similarly, in Palm Springs, Calif., demand went up 58 percent and supply 31 percent; and in Manhattan, demand grew 166 percent and supply 108 percent.

So if you bought a second property to rent out, you’re not necessarily in for a dry spell. And while your first thought might be to hire a property manager to find tenants, that’s not necessarily your best option.

“You need to be very cautious in choosing your property manager, and be sure to have a firm understanding of what is expected from their services,” Mr. Pope said. “You should also not necessarily leave all the marketing up to the property manager. They generally have a lot of properties in their portfolio to worry about; you may want to give your own property special attention.”

To do that, look to online vacation-rental listings you can publish yourself, which can give you a wide audience with little effort. Some of these sites, like HotPads.com and Craigslist.org, offer free listings, while others, like VRBO.com and HomeAway.com, provide a number of services based on a subscription fee.

“My first recommendation, to the extent that your budget allows it, is to buy multiple subscriptions,” Mr. Halloran said. “You’ll reach different audiences.”

And don’t ignore the overseas market. “I wouldn’t recommend that someone, say, with an apartment or condo on the Texas Gulf should advertise in the U.K.,” Mr. Halloran said, “but if you’ve got a place in Orlando, you’re probably going to get some good demand from Germany and the U.K.”

The next step is to make sure that your listing stands out from the rest, by doing things like “taking the right photos, writing compelling titles and making sure your availability calendar is updated,” Mr. Halloran said. Photos, he said, are the most important factor.

“A lot of people have owned their property for a while,” said Robert Boyer, a real estate investor adviser with San Diego’s Finest Real Estate. “They can drop their rates a little bit and still come out with a positive cash flow, or at least not a negative cash flow. Whereas people who’ve bought more recently have a more difficult time.”

If you aren’t having much luck, consider offering a different kind of incentive. On HomeAway.com, Mr. Halloran has seen people offer a free eighth day on a seven-day stay or no cleaning fee. “There was one in Maine that offered a free bucket of live lobsters and a bucket of beer,” he said.

Clearly, with a little online savvy, a little creativity — and maybe a little beer — you can still find renters.